Israel’s economy prospers despite years of war, but prices worry voters

What the report says

Al Jazeera reports that Israel’s economy has remained unexpectedly strong despite three years of regional war, with growth, markets and investment all holding up better than many analysts anticipated. The article says GDP rose in 2025 and continued to expand in the first half of 2026, while unemployment stayed low and inflation remained relatively modest. The election campaign for the October 27 vote, however, has still centered mostly on national security rather than economic management.

A major driver of the rebound has been the technology sector, which the report describes as largely insulated from the conflicts and closely tied to global demand for cybersecurity and artificial intelligence. Al Jazeera says foreign investment in Israeli tech reached record levels last year, helped by large acquisitions involving global firms, and remained strong this year. The country’s defence industry has also benefited from wartime demand.

At the same time, the article notes that the war has imposed heavy costs on the state budget. The Bank of Israel has estimated the conflict has already cost hundreds of billions of shekels, and the government is seeking a much larger defence budget in the years ahead. That has raised concerns about fiscal pressure and public debt.

Despite the upbeat macroeconomic picture, the report says many voters are focused on everyday living costs. Food prices have risen faster than overall inflation, and economists quoted by Al Jazeera argue that higher prices, slower real wage growth and strained public services are weighing on households. The broader context is that Israel’s economy may be expanding, but many citizens are not feeling the gains equally.